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Levels to watch: FTSE, DAX and Dow

Today’s empty macro calendar leaves markets somewhat bereft, although the impending commencement of US earnings season does at least mean that markets will have more meat to chew on later in the week.

Volatility is once again back in fashion, especially as markets begin to look towards the key events of the month – namely the European Central Bank meeting on 22 January and then the Greek election on 25 January.

A weaker US dollar is certainly helping risk assets this morning, as once again markets begin to price in the idea that the slump in oil prices pushes back any prospective rate increase from the Federal Reserve.

FTSE RSI continues to rise

Last week’s bounce stalled at the 50-day moving average, and while the rally is intact from last week’s lows the market seems to have stalled for now. The relative strength index is still rising, but the index must manage a daily close back above 6580 to maintain momentum.

The next target would be the 6630 level, the December peak, and thence on to the 200-DMA. On the downside, 6490 appears to be holding as support for the time being, with further weakness taking us back to the 6370 area that saw the index stabilise last week.

The hourly chart sees the index moving back above the 200-hour MA, with the 50-hour still above the 200-hour. A steadily rising trend off the lows of 6 January could provide support if today’s gains prove difficult to hold.

DAX eyes 9810

The picture for the DAX still looks much cheerier, with the price sitting above all three major moving averages and seemingly preparing itself for a challenge of the highs from last week above 9800.

However, bulls should beware the descending trendline on the four-hour chart that runs from the high of 8 December. The price showed a marked reluctance to break this line last week, which does put the emphasis back on the downside.

A close back above 9810 on a daily chart takes us on to resistance at 9940 and then the peak from early December above 10,000. Downside support could be found around the 200-day at 9570 and then around 9470, the low from last week.

Dow supported by 50-DMA

The Dow Jones has staged an impressive comeback from the lows around 17,400 that we saw last week, Friday’s price action notwithstanding. As with the other two indices, a close through the high of last week, which in this case sits around 17,900, would take us on to the all-time highs above 18,000.

The index does seem to have found reasonable support at the 50-DMA, with any dip lower taking us back towards 17,400. Arguably the rising trend off the October low still holds, with rising support at 17,590.

The hourly chart shows the index nudging its way back above the 200-hour MA once more, having found support around 17,700 in the overnight session. Now the index must clear the 50-hour MA to challenge the area around 17,900.

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